free float
The portion of a company's shares that are publicly available for trading, excluding shares held by insiders, governments, and strategic investors.
Example
“Though the company had 1 billion shares, insiders held 60% — leaving only a 400 million share free float for public trading.”
Memory Tip
FREE FLOAT = shares actually available to trade publicly. Excludes locked-up insider holdings.
Why It Matters
Free float determines how easily you can buy or sell shares of a company on the open market. A larger free float typically means better liquidity and lower trading costs for individual investors, while a smaller free float can lead to price volatility and difficulty executing large trades.
Common Misconception
Many people assume that the total number of shares outstanding equals the free float, but this overlooks the significant portions locked up by founders, insiders, and institutional strategic investors who rarely sell their holdings.
In Practice
Consider a company with 100 million total shares outstanding where the founder owns 30 million shares, employees hold 15 million restricted shares, and a government pension fund holds 10 million shares strategically. The free float would be only 45 million shares, meaning public trading liquidity is based on less than half the company despite the large total share count.
Etymology
FREE (available for public trading) FLOAT (shares in public circulation). Shares FREELY FLOATING in the market.
Common Misspellings
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See Also
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